27 days ago • 1 min
In the long term, how Amazon will make money from furnishing its shoppers, third-party sellers, and advertisers with the latest AI tools is probably what matters most for the stock price. But because that’s still all very uncertain, investors are staying focused on Amazon’s cloud business – AWS. Like Microsoft’s Azure, AWS should be getting a boost from AI, but the perception is that it’s falling behind Azure because it lacks the sophistication of Microsoft x OpenAI.
Now, AWS has been growing more slowly than Azure (although, to an extent, that’s to be expected since it’s a fair bit bigger), but directionally, they’ve been on the same path – they both went through a deceleration period and are now picking up steam again. That means AWS is expected to improve upon last quarter’s 15% growth – which itself was built on the prior period’s 12%. If it doesn’t, then you can bet the stock will hit a sizable air pocket.
Outside of AWS, Amazon’s core retail business profitability has improved a lot of late, scaling some massive investments in logistics, and seeing an easing in both wage inflation and supply bottlenecks. That matters, because Amazon’s fastest-growing businesses (AWS and advertising) have much fatter margins than its retail, and investors don’t want the core shopping business to spoil what should be a nice overall improving profitability picture. What’s more, the holiday shopping period was reportedly good for e-commerce, so investors are already, ahem, primed for good results from Amazon’s clicking-and-buying business. Anything less would end in disappointment.
–Amazon is expected to announce earnings on Thursday, February 1st, after the close of trading.
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